[Original title: "Prof. Markus Kerber zur Eurokrise: 'Ein Schwall von Inflation'", in korrektheiten.com, January 14, 2012. Translation by MKH]
The Deutschlandfunk (DLF, a public German radio station) has aired, Friday night, an interview with Professor Markus Kerber. Kerber is an economist at the Technische Universität Berlin. He conducts research on public finance and economic policy. The occasion was the downgrading of the creditworthiness of France from AAA to AA + by the rating agency Standard & Poors. It was about the impact on the Euro. Kerber was speaking in plain language. He said among other things:
In total, Germany can try in this situation only one thing: withdraw from the Euro rescue fund – at least from the Euro rescue fund – to secure its rating and to save [herself]. Otherwise, in the near future the conclusions from Germany’s liability-causing situation will have to be drawn. Germany will have to be liable for all, and this necessarily leads to a serious downgrade. The bailout funds …
Question: That means, if I understand you correctly, that the bailout fund has now become history?
This is the beginning of the end of the bailout. Due to the liability of France, at least in the medium term the bailout fund cannot obtain financing on the terms that are necessary to fund the financially distressed countries.
Question: But is the situation so explosive, can we assume that interest rates now are going to rise dramatically in the countries that have been downgraded?
This depends on whether in these countries a radical austerity is now announced and carried out. So far we have just a declaratory policy. But even if it were announced, it would actually have to be implemented. We are in the maelstrom of a pan-European financial crisis, and Germany can escape this maelstrom only by escaping quickly from the Euro rescue fund, and by making clear that she is no longer prepared to take the liability and responsibility for the stabilization of the completely rotten states. Finally, the taboo has to be broken that the Euro zone is viable as such; Germany needs today more than ever a plan B to abruptly leave the Euro zone, together with the other trade surplus countries like the Netherlands, Luxembourg, Finland and Austria.
Question: You are speaking clearly as a Euro skeptic. How will the ECB, the European Central Bank …
… not a Euro skeptic, but a pro-European. Those who don’t want Europe, European integration and the European single market to be longer burdened with the religion-like Euro project, have to draw conclusions from the actual situation: conclusions that politicians are not ready to draw, because they are responsible for this policy and the current situation.
Question: But how will the ECB, the European Central Bank respond? Are you worried that they will start the printing press?
This is already under way: Mr. Draghi has, on the one hand, declared that the European Central Bank cannot run fiscal policy through bond purchases, but the ECB has, on the other hand, facilitated the security requirements for the refinancing of banks in a way that banks in the Euro area now can submit ANY paper to refinance. This is somewhat simplified, but it’s true in the trend. The result: Of the 489 billion € banks have retrieved, Italian banks alone have retrieved 116 billion. But the call to use the ECB as fiscal firefighters will even become louder, and this means, economically, exactly what you have just said: that the printing press is started, and then, after a delay, a flood of inflation will swamp us.
[Questions asked by Oliver Ramme. The interview is available on the following URL for some time: http://ondemand-mp3.dradio.de/file/dradio/2012/01/13/dlf_20120113_2315_1784255d.mp3]
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